Janine Wedel - Shadow Elite - How the World's New Power Brokers Undermine Democracy, Government, and the Free Market

26. Many analysts and observers lauded NGOs and other “civil society” actors, even becoming triumphalist in tone, especially in the immediate Cold War aftermath. Some tended to attribute to transnational nonstate actors a positive role in society, such as that of helping to build “civil society” or democracy. Of course, there are many examples of human and indigenous rights and environmental advocacy organizations working effectively and valuably across borders. (One is the Soros-funded East-East initiative, which funds partners in different postcommunist countries to do joint projects ranging from mini-ecological endeavors such as protecting endangered bird species and cleaning up parts of the Russian far east wrecked by military-industrial installations to organizing vacations for Belorussian children affected by Chernobyl and working with drug and alcohol addicts throughout the region.)

However, a darker side of “civil society,” replete with opportunities for actors to mesh state and private power in the service of their own interests, is also part of the reality. See, for example, Bob Clifford, The Marketing of Rebellion: Insurgents, Media, and International Activism (New York: Cambridge University Press, 2005); Alexander Cooley and James Ron, “The NGO Scramble: Organizational Insecurity and the Political Economy of Transnational Action,” International Security 27 (Summer 2002), pp. 5–39; and Sebastian Mallaby, “NGOs: Fighting Poverty, Hurting the Poor,” Foreign Policy (Sept-Oct 2004), pp. 50–59. Consider, for instance, that the circumstances that enable respected and effective NGOs to work effectively across borders, and the informal networks and local ties that help them cut through bureaucracy, meanwhile may do the same for organized criminal groups. Such groups seldom function without links to the state. See, for example, Phil Williams, “Russian Organized Crime—How Serious a Threat?” Transnational Organized Crime 2, no. 2/3 (Summer/Autumn 1996), p. 20, and Roy Godson, “Enhancing Democratic Society through a Culture of Lawfulness,” Trends in Organized Crime 4, no. 2 (Winter 1998), p. 6.

27. Technology is about manipulating nature, and, increasingly, also the biology of homo sapiens . Complex technologies are typically those that cannot be understood in detail by any one expert. Technological complexity can be identified by looking into: the number of components in a product; the cybernetic nature of the systems and subsystems that integrate those components through feedback loops; and the sociotechnical systems that combine product technologies with social processes, in other words, the organizational systems that innovate the products. See Robert Rycroft and Don E. Kash, The Complexity Challenge .

On how complex information technologies consolidate power, influence, and commerce, see Barry C. Lynn, Cornered: The New Monopoly Capitalism and the Economics of Destruction (New York: John Wiley, forthcoming 2010), ch. 2.

With regard to technology giving government the tools to hide secrets and impede transparency, see Alasdair Roberts, Blacked Out: Government Secrecy in the Information Age (New York: Cambridge University Press, 2006). See also James Bamford, The Shadow Factory: The Ultra-Secret NSA From 9/11 to the Eavesdropping on America (New York: Doubleday, 2008).

28. With regard to commodity prices, a U.S. government report of April 2009 concludes that, in 2008, due to the influx of financial flows into commodity markets, natural gas and electricity prices were driven far in excess of the levels related to supply and demand. According to the report, “the rise in natural gas prices coincided with a global increase in many commodity prices. This increase in commodity prices occurred as large pools of capital flowed into various financial instruments that essentially turn commodities like natural gas into investment vehicles. Ultimately, we believe that financial fundamentals along with the modest tightening in the supply and demand balance for gas during the first part of 2008 explains natural gas prices during the year,” http://www.ferc.gov/market-oversight/st-mktovr/som-rpt-2008.pdf, p. 8.

A U.S. congressional investigation into wheat prices comes to a similar conclusion. See Press Release, “Investigations Subcommittee Releases Levin-Coburn Report on Excessive Speculation in the Wheat Market,” Senate Committee on Homeland Security and Governmental Affairs, June 24, 2009, http://hsgac.senate.gov/public/index.cfm?FuseAction=PressReleases.Print&PressRelease_id=5a459e69-e9f9–4550–904c-871a5b6c693a&suppresslayouts=true. With respect to oil prices, the Commodity Futures Trading Commission, as of mid-2009, was preparing a report indicating that speculators helped drive huge swings in oil prices, according to the Wall Street Journal (http://online.wsj.com/article/SB124874574251485689.html#mod=djemalertNEW).

With regard to exemption from regulation: “Legal certainty” that derivatives will be exempted from regulation is specified in Section 2(g) and 2(h)(1) of the Commodity Exchange Act. The Commodity Exchange Act, passed in 1936 by the U.S. Government, was last amended in 2008, http://agriculture.senate.gov/Legislation/Compilations/Comex/COMEX.pdf.

With regard to the Bank for International Settlements, see Monetary and Economic Department Bank for International Settlements, “Regular OTC Derivatives Market Statistics” activity in 2005 and 2008, http://www.bis.org/publ/otc_hy0611.htm. The December 2005 figure is at: http://www.bis.org/publ/otc_hy0611.pdf. The June 2008 figure is at: http://www.bis.org/statistics/otcder/dt1920a.pdf.

29. Regarding the Obama administration’s position on regulating OTC derivatives, Treasury Secretary Timothy Geithner opposes banning naked credit default swaps (Edmund L. Andrews, “Unresolved Questions After Hearing With Geithner, New York Times, July 11, 2009, http://query.nytimes.com/gst/fullpage.html?res=9E00E2DB123FF932A25754C0A96F9C8B63&sec=&spon=&pagewanted=print). See also http://money.cnn.com/news/newsfeeds/articles/reuters/MTFH43652_2009-07-22_18-14-11_N22324533.htm.

With respect to G-8 finance ministers calling for regulation, see, for instance, Jo Winterbottom, “G8 Finmins Want Curbs on Commodity Speculation,” Reuters , June 13, 2009, http://in.reuters.com/article/governmentFilingsNews/idINLD42648720090613.

With regard to the political power of the financial services industry, see, for instance, a letter to Henry Waxman, chairman of the House Committee on Energy and Commerce, and Edward Markey, chairman of the House Subcommittee on Energy and Environment, from members of the New Democrat Coalition, which expresses concern about proposed regulation: “We are concerned about provisions related to derivatives and the Over the Counter (OTC) market. Specifically, we are concerned about requiring all OTC derivatives and swaps to be centrally cleared and settled” (June 17, 2009), letter in author’s possession.

30. The anthropologist of finance here quoted is Bill Maurer. With regard to offshore finance, the OECD developed a program to try to regulate it. In the spirit (and practice) of democratic participation of all stakeholders, the OECD allowed the trust and estate practitioners to take part. Not only did they merely participate, however, they created new multilateral organizations modeled on the international organizations that were trying to regulate them that then had to also be included in the initiative. This altered the rules of the endeavor and necessitated greater participation by those most affected by the shifts in regulation. Thus island economies with few other choices in the world economy ensured a continued position for themselves and got themselves invited. See Bill Maurer, “Re-regulating Offshore Finance?” Geography Compass 2, no. 1 (2008), pp. 155–175, http://www.anthro.uci.edu. The quote from Bill Maurer is from my interview with him (July 26, 2009). High finance uses policymakers’ purported lack of understanding of financial instruments as “a narrative,” according to Bill Maurer—one “that empowers the people who can say, ‘listen Congress, listen policymakers, we’re the ones who know what’s going on. So just back off. There’s no way you can understand unless you have a degree in advanced math’” (author’s interview with Bill Maurer, July 26, 2009). This “narrative” has been analyzed by anthropologists, geographers, and sociologists of finance. Their research has found that financial traders, while they may have complicated formulas at their fingertips, admit to often making decisions based on intuition without first calculating the numbers. For a review of this area of scholarship, see Bill Maurer, “Finance,” A Handbook of Economic Anthropology , James G. Carrier, ed. (Northampton, MA: Edward Elgar, 2005), pp. 187–190.